prevention of abandoned housing projects Essay

Chapter 1: Introduction

1.1 Project Title

A survey on the bar of abandoned lodging undertakings in Malaysia.

1.2 Problem Statement

In developing state, the building sector forms a high per centum of the economic system and it besides represents one of the most dynamic and complex industries environments ( Peurifoy an Ledbetter, 1985 ; Rahman.H.A et al. , 2006 ) 1. As a underdeveloped state, lodging development in Malaysia is one of the issue reflect the growing of population state, lodging development in Malaysia is one of the issue reflects the growing of population and economic in this state. Since Independence Day, lodging development is one of the sectors highlighted to better and budget in the Malaysia ‘s program. Although lodging industry has served as the development of economic and societal and has benefited the state. However, there is countless undertaking failures Andrew Tan, ( 2004 ) 31 province there are countless unsold belongingss ensuing in immense belongings overhung, which is one of the more urgent signifier of undertaking failures. Though twelvemonth after twelvemonth abandoned lodging undertaking have been widely highlighted by the local media and even through the ministry of lodging and local authorization are yet find an effectual solution to assist the lodging purchaser to get the better of the job facing by them. ( Datuk Seri Kong Cho Ha… ‘Project forsaking is serious as the casualties are consumers and their hard-earned money. ‘ ) Was reported in the star ( 2009 ) 32. With the reappraisals on what other research workers had done are the manner to revival the derelict undertaking but if the job taking the undertaking being abandoned have solve, that ‘s no more undertaking will abandoned and being waiting to revival. This research is to show the cardinal issues of successful and failure of lodging undertaking so that thought the research to happen out the manner to bars for a undertaking non being abandoned.

1.3 Purposes

To analyze the key to avoid holding abandoned lodging undertaking in Malaysia

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1.4 Aims

  1. To analyze the conventional method of lodging development bringing
  2. To place the causes and effects of abandoned lodging undertaking.
  3. To analyze the method of bar for lodging undertaking being abandoned.

1.5 Background

In Malaysia, the lodging industry is lending to the economic and societal development of the state. Housing policies for Malaysia are stipulated in the Malaysia program and each of it is for a period of five old ages. ( Rahim & A ; Co research ; 1992-2007 ) 34. The authorities of Malaysia recognizes lodging as a basic human demand and an of import constituent of the urban economic system. This has led to the preparation of policies and coders aimed at guaranting that all Malaysians have an entree to adequate shelter and related lodging installations ( Rameli.A, 2006 ) 38. In Malaysia, lodging development is carried out by public and private sector.

Harmonizing to ( Asiah, 1999 ; cited by Rameli.A, 2006 ) 70 Malaysia authorities has formulated a lodging policy which aims to beef up the engagement of private sector in lodging production and bringing particularly in lodging strategies development. Under the 9th program period ( 2006-2010 ) , chief aim of the lodging policy is to supplying equal, low-cost and quality houses for all Malaysians. Toward this terminal, the private sector will take the function to supply the necessary support and regulative steps to guarantee efficiency. ( 9th Malayan Plan 2006-2010 ) 35 And yet, there are regulations, regulative and policy issues in order to transport out the lodging development, developers has to follow with all demands laid under the lodging developer Act ( Control & A ; licensing ) 1966 ( Act118 ) and every bit good as other related statutory demands of local authorization in commanding edifice quality.

Although lodging development has benefit to the state in development of economic sciences, societal. And yet, there are undertaking which are failed to be completed. This will eventually do the job of abandoned lodging undertaking. There are some issues rose from developers such as fiscal and direction jobs, rawness of the developers, unsuitableness of site and location, hold in acquiring program blessing, unequal market study and/or feasibleness survey, failure of undertaking direction, and planning of the belongings market. Failure to finish the undertaking is non merely happened among the private developers, but besides happened to the rawness contractors, instability of constructing stuff supply and monetary values, and province development corporations ( Zulkifli. 2005 ) 68.

1.6 Scope of survey

The survey will name out the standards of successful lodging undertaking being implemented in Malaysia and how the private and authorities can play a function in order for the undertaking to go successful.

The survey will besides look into wholly action to be taken by authorities, private sector, developers and contractors in order to avoid the undertaking being abandoned.

1.7 Research Methodology

To transport out the survey, questionnaire will be adopted as the primary informations it is utile method to derive the information as this subject may affect sensitive inquiries. As there is no interaction between the research worker and respondents it would ease response of accurate information. They will be set of open-ended inquiry and close-ended inquiry prepared and sent to 50 relevant parties such as providers, developers, contractors, authorities bureaus.

Secondary resources will be focus on obtaining relevant information for the undertaking failures and abandoned lodging undertaking which data accretion will from the publishing house resources for illustration Newspaper ( The Star ) , Magazine ( The Edge Malaysia ) , Online resources, journal browse from cyberspace, books, diaries, and aggregation from authorities bureaus.

1.8 Contribution

Through this research, it will derive the cognition of peculiar parties for them to get the better of and manage job, every bit good as to forestall the lodging undertakings being abandoned in Malaya

1.9 Proposed construction of the thesis

Chapter 1: Introduction

Introduction lodging development in Malaysia and the consequence of abandoned lodging undertaking.

Chapter 2: Literature reappraisal

Determine the lodging development procedure and the successful and failure of lodging undertaking from diaries, book, information ministry of lodging section, information from Construction Industry Development Board and e-book and e-journals. To place the figure of lodging undertakings being complete and abandoned.

Chapter 3: Literature reappraisal

Determine the lodging development procedure from diaries, book, and information ministry of lodging section, information from Construction Industry Development Board and e-book and e-journals. To place the figure of lodging undertakings being complete and abandoned

Chapter 4: Literature reappraisal

Determine the factors lead to success for lodging development undertaking and suggested action to be taken to forestall the lodging undertaking being abandoned from diaries, book, and information ministry of lodging section, information from Construction Industry Development Board and e-book and e-journals.

Chapter 5: Research Methodology

The method for this research is utilizing questionnaires. A questionnaire is developed to ease systematic informations aggregation in this survey. The chief intent is to obtain facts, informations and basic information from every party that involves in this country of survey. Open-end inquiry and close-end inquiry will fix sent to the difference parties who involve in the building and lodging development industry. Envelop and root will direct together with the inquiry for them to derive their response and sent back to the research worker. The benefit of open-ended inquiries is that they give the respondent freedom to supply a complete and unstructured response. Between, unfastened questionnaires are utile in finding the thoughts, ideas or constructs that first come to mind when a specific inquiry is posed ( Rodeghier, 1996 ; cited by Nima, 2001 ) 69. Other than that, on-line resources and publishing house information is addition to be portion of the manner to obtain facts, informations and basic information. At the terminal of the questionnaires subdivision, consequence will be tabulated in charts, graph, and pie signifiers. This will reflect the tendency and indicates the distribution of figure to assist in analysing the jobs.

Chapter 6: Datas and analysis

After the addition the respondent reply, all the analysis consequences will be record and explicate in this chapter. All the consequence will establish from the respondent and given a decision beginnings from the reply they reply.

Chapter 7: Decision

In this chapter will name down the accomplishment of aims for this thesis and will be concluded and commented. Other than that, my personal sentiment and remark will besides be in this chapter.

Chapter 2.0: Housing development

2.1 Introduction

Policies related to the lodging development are outlined in the assorted five-year Malaysia Plans under the commissariats for societal and macroeconomics aims. The Government supervises and proctors the overall lodging undertaking through the Ministry of Housing and Local Government. Besides that, private sectors besides play a primary function in developing the lodging industry. Housing development activities by the private sectors are capable to the Housing Developer Act ( Control and licensing ) 1966 and Housing Developers Regulations ( Control and Licensing ) 1989. Nevertheless Sabah ‘s Housing Development ( Control and Licensing ) Enactment 1987 and Sarawak ‘s Housing Developer ‘s ( Control and Licensing ) Regulation 1993 was enacted on their ain. Under the act, developers are required to follow with all demands under the Acts of the Apostless every bit good as other related statutory demands in order to obtain a licence to transport out any development when they undertake lodging development affecting the building for more than four units of lodging adjustment. ( Buang S. , 1993 ) 2

Unfortunately, the present agreement has its defects. Even thought the authorities have the regulations to understate the failures of the undertaking, there is a possibility that the developers will neglect to finish the undertaking due to unqualified contractors, unsuitableness of sites and location, holds in acquiring programs approved, fiscal and direction jobs ( Esha Z. , 2006 ) 3. Harmonizing to Enshassi.A ( 2006 ) ) 4 the economic rhythms and political environment has a significantly high rate of concern failure. On top of concern failure, prostration and bankruptcy are common footings in the industry due to the many hazards inherited on how the industry operates.

In Malaysia, abandoned lodging undertakings are acquiring severe. The effectivity non merely important to the houses purchaser for their ain a shelter but besides wellness issues needed to be addressed to the citizen and conceive ofing corruptnesss amongst developing state when absorbing investing. Reported by The Star ( 2008 ) 5 an abandoned undertaking could hold been cause of the landslide. Furthermore, an abandoned undertaking will do the site turning into a hangout for drug nuts where hideaway for felons and an ideal genteelness land for mosquitoes reported in The Star ( 2008 ) 6.

2.2 Definition of Housing Development

Harmonizing to Buang S, ( 1993 ) 27 under Housing developers Act 1996 ( Act118 ) subdivision 3 of the act defines “ lodging development ” merely to mean- ” the concern of developing or supplying monies for the development or buying, or of party development and partially supplying monies for buying, more than four units of lodging adjustment which will be or are erected by such development… ” . Furthermore in this chapter, it will touch on the conventional bringing methods where sell off the program and construct and sell would be explained and elaborated.

2.3 Conventional method of development bringing

2.3.1 Traditional Selling-Off-The-Plan System

At the occasion of Selling-Off-The-Plan construct by the Housing Buyers Association, is the system that selling or purchasing house are off the programs or incomplete. By and large, Selling-Off-The-Plan system usually implemented in developing states which acceptance in Malaysia every bit good. As the Selling-Off-The-Plan system manages to present houses to run into the lodging supply mark in Malayan program. By utilizing Selling-Off-The-Plan system a possible purchasers make a engagement and pays 10 per centum of the gross revenues monetary value upon sign language of the Gross saless & A ; Purchase ( S & A ; P ) understanding for the purchase of a house. The developers are allowed to roll up money upfront even before get downing building work on their undertakings. It is unjust to the possible purchasers as it is an irregular state of affairs for the belongings industry.

More frequently the purchaser so will makes a loan agreement with a bank to finance his purchase ( KPKT, 2007 ; cited by Isa, Z, 2008 ) 43. Following the bank would let go of stage payment straight to Housing Development Account ( HDA ) of the undertaking upon enfranchisement by the designer harmonizing to the phases able to claim in Schedule Payment ( Schedule G for houses build on terra firma where Schedule H is for high-rise edifice ) . Then from that occasion, the loan sum and balance purchase monetary value will be paid increasingly to the developers in conformity with the assorted phases of building plants. The terminal moneymans were placed with the load to pay out the sanctioned loan increasingly. They were duty-bound to guarantee the loans disburse were for work performed by the developers and they were normally supported in the signifier of Architect ‘s Certification.

The drawback found here is where the blessing from the developers will usually convey longer period whereas clip is the kernel of the undertaking ( usually 6 months blessing instead than 4 months implied on physique and sell construct ) . If the undertaking is under classs Schedule G the undertakings have to be completion within 24 months from the day of the month of sign language of the Sale and Purchase understanding. For any undertakings under Schedule H categories the undertakings have to be completion within 36 months from day of the month of sign language of the sale understanding. During the waiting of authorization blessing it wills possible happen of any unanticipated fortunes for illustration the rises of stuffs cost and if the developers ca n’t affordable the cost so the undertaking may late bringing or become abandoned.

Additionally, sell off the program system tends to be really lead oning through myriad of colorful and fantastic design booklets ( possible purchasers rely on advertizement ) that would guarantee to lure clients. Consequently house is bought on nil more than an creative person ‘s feeling where the location of the site is still a bare land. There are hazards of undertaking being abandoned as the un-build houses is sold by demoing the possible purchasers a theoretical account house, which the design and craft may be different from the existent unit built. ( HOME FINDER, 2006 ) 13

Chapter 3.0: Abandoned Housing Undertakings

3.1 Introduction

As one of the development states, Malaysia excessively faced deficient supply of lodging units besides other legion jobs such as trouble in acquiring CF and land rubrics blessing, late bringing and abandoned undertakings which have affected most house purchasers ( Sen M.K, 1985 ; Esha Z, 2005 ) 15. Therefore, jobs such as derelict undertakings, belongings overhang, late bringing and cheapjack craft had about been accepted as a norm in the Malayan belongings development industry. Abandoned undertaking can be classified into 4 classs which are:

  • Abandoned undertaking which have the chance for rehabilitation
  • Abandoned undertaking which are taken over by other developers
  • Abandoned undertaking which are non suited for rehabilitation
  • Completed and rehabilitated undertakings

Harmonizing to Dahlan N.H, ( 2008 ) 16 even though there are statute law that cater for lodging development in Malaysia, record shows that, the abandoned lodging undertaking maintain on repeating particularly so during the economic downswing. This is apprehensible, as in economic recession, Bankss would be loath to allow lodging loans as they are many unemployed people or dismissal instances, all of which, ensuing in societal and economic unease and pandemonium in the state.

3.2 Definition of abandoned lodging undertaking

Hitherto, ironically there is yet holding any official, legal or judicial definition on the significance of ‘abandoned lodging undertaking ‘ . Nevertheless, that is a practical definition which for the intent of facilitation and disposal has been given by the Ministry of Housing and Local Government ( ‘MOH ‘ ) . The definition as follows:

  • Construction and development plants on site had been stop for uninterrupted 6 months or more. Such expiration has either occurred consecutively or occurred during the period within which the undertaking must be completed or beyond the needed completion period stated in the Sell & A ; Purchase understanding. Completion period means the period within which the developers has to finish the building of the lodging units. Property with land completion period is 24 months calculated from the day of the month of the sale and purchase understanding being executed, whilst for flats the completion period is 36 month from the day of the month of the sale purchase understanding.
  • Within the said continuance of 6 months, the developers concerned had been wound up and has been put under the control of the Official Receiver
  • Military officer of lodging ministry in sentiment that the developers is unable to go on to execute his duty as a developers.

3.3 Effectss of abandoned lodging undertaking

Harmonizing to the latest study from the Ministry of Housing and Local Government ( ‘MOH ‘ ) , until June 2009, there were about 146 undertakings throughout Peninsular Malaysia that have been identified as abandoned lodging undertakings. These jobs involved 48,878 lodging units, and 31,095 buyers. Most of the undertakings occurred in Selangor with 40 undertakings, followed by Johor ( 33 undertakings ) and Negeri Sembilan ( 20 undertakings ) etc. The province which no abandoned undertakings is Perlis. Overall the significant figure is a cause of concern to the general populace, who may lose assurance in lodging developers particularly to those who were or are already be the victims. On its ain, these Numberss may non look surprised high but when position from position that there are 10s of 1000s of people who are aggrieved by such failed undertakings, it become a serious job that needs to be resolved desperately.

When a undertaking is stalled or abandoned the house purchasers is confronting pecuniary losingss as they have to settle monthly loan refunds and some may hold to go on forking out lease for their current residence. Worst instance scenario would predicament the house purchasers with blacklisting from the bank and application on loan for the 2nd clip would be hard as they ca n’t refund their loan in the derelict lodging undertaking. Harmonizing to him, who is besides our Minister of Housing and Local Government, undertaking forsaking is serious as the casualties are consumers and their hard-earned money. Besides that, from an industry position, the economic cost is reeling ; abandoned undertaking besides impacting many other related industries including providers of building stuffs, transit companies, contractors and advisers. Abandoned undertakings were really unsafe when it comes to landslides, where the site is non completed and there is no care of the site and hence doing the inclines to prostration.

Furthermore, National Economic Action Council ( NEAC ) ( 1999 ) has identified that one of the grounds why the economic system of the state suffered severely during the 1997 economic recession was due to overhung and flood in the belongings market ; inclusive of the lodging belongings. Since economic recession signifiers major issue in this state, it will straight act upon the other running undertaking to go derelict ( Rameli.A, 2006 ) 42.

3.4 Causal success or failure of lodging undertaking

3.4.1 Causes of abandoned undertaking in Sell-Off-The-Plan System

Harmonizing to Isa, Z, ( 2008 ) 44 the jobs in the current sell off the program construct is placing from three positions of non-performing developments, undertaking failure and fiscal hazards that house purchasers have to bear as consumers. The purchaser non merely been financially ruined, but besides suffer on the household, emotional and wellness foreparts. Isa, Z, ( 2008 ) 45 points out that the ailments for non-performance development in the industry grew from 151 undertaking in 2002 to 245 undertaking in 2005, which affected 28,550 purchasers in 2002 to 38,315 purchasers in 2005 and out of these ailments more than a 3rd of ailment apprehensiveness were refering hapless timeliness lodging bringing and non-delivery of lodging units and another 29 per centum involved strata rubric issues harmonizing to National House purchasers Association ( HBA ) which recorded Non-Performing Developments and Ailments from House Buyers between 2002 and 2005. When they is late bringing of lodging unit to the house purchasers it may do the developers contain an excess cost to counterbalance the purchases liquidated amendss or even any unanticipated fortunes doing the cost for building addition and it will eventually do the undertaking become abandoned as doing the developers losingss of net income. Besides that, Selling-Off-The-Plan system may do the late issue of Certificate Fitness ( CF ) and it will do the house purchasers unable to travel in to busy their physique. Even they move in it will illegal to remain in their ain belongings.

The undertaking failure and abandoned lodging undertakings may come from the list below:

  • The developers may run abruptly of financess to continua the hard currency flow as the undertaking could non make the needed sum of gross revenues ;
  • The developer ‘s edifice contractors can non present their contractual responsibilities of building the edifice and the developers may be stuck in a legal hassle, which may besides impact house purchasers.

In the current sell off the program construct, it has to turn to the fact that the purchaser ‘s money is stuck and he is dragged into a really addled legal state of affairs and it has to digest finance hazard as consumers in lodging development. When house purchasers buy off the program, they have to paid the 10 per centum sedimentation and phase payment in conformity to building stage. Therefore they have to shoulder many hazards, whether or non the house will be completed on clip, the possibility of the undertaking being abandoned, delayed or varied from original program.

Furthermore, the 10 per centum sedimentations are based on development value of the lodging undertaking. Buyers paid the sum even before the foundation costs incurred during the building stage. This indicates that purchasers finance lodging development undertakings right up front before the starts of the building works. With this type of construct it will do the lodging undertaking abandoned easy as the irresponsible developers when found the undertaking are no longer profitable by certain ground so he will give up the undertaking to cut down his losingss. Meanwhile, the house purchaser ‘s may hold to incur rental or other disbursals while waiting to travel into the new house.

Other than that, the debut of Housing Developers Account and standard Sale and Purchase Agreement by the authorities has been slow in undertaking this job of abandoned lodging undertakings. However, it can non be wholly resolved since a undertaking abandoned for a host of other ‘non-financial ‘ grounds, such as jobs with homesteaders, differences between developers and designers, direction job, developers “ disappeared ” and jobs with Public Works Department, etc. ( Sothi,1992 ; cited by Esha. Z, 2006 ) 47

Furthermore, the deficiency of monitoring and strong enforcement on the portion of the Housing Ministry has besides contributed to the ground on why the undertakings fail and this division ‘s work load is highly heavy and it can non maintain a changeless vigil on developers therefore lend to farther jobs like the on-going pattern of acquiring purchasers to pay for a belongings strictly on the conceptual footing besides known merely as the sell off the program construct. It will besides take irresponsible developers to abandon the undertaking as they are no policy or act to penalize those developers who give up undertaking easy. This indirectly lays a sense of irresponsible developers who simply wanted to acquire their edifices sold and non serving the house purchasers.

Therefore the incorrect measure carried out by the purchasers through uninterrupted payment of loan colony and installment of the house without even look into decently whether the undertaking might even travel where in the latter phases, because legal issue on money transferred on the return of nil. They are besides job arise as the house purchasers more rely on the undertaking theoretical account and advertisement screening by developers. It may be different in site as the cheapjack craft and non-adherence to the edifice program. At the terminal the jobs which arise will be barely in acquiring authorization blessing for illustration CF and undertaking being abandoned. The developers might caught the bank by rip offing them on the advancement payment needed certified by Architect who illicitly cabaling with the developers. The sell off program would non critically impacting the fiscal state of affairs of the developers as compared to construct and sell as the developers has the fiscal backup unlike trusting on one ego ‘s fiscal power where inability to acquire the money to commence with the undertaking would incurred more bridging loan ( non needfully the bank will O.K. ) regardless of CF issued. ( HOME FINDER, 2006 ) 25

3.4.2 General factors lead to undertakings failures and abandoned

Harmonizing to Balchin P.N, ( 1985 ) 33 development are complex and dearly-won as it may hold cardinal alterations occur in the market to increase the hazard before the strategy is successfully completed. Many undertaking fails and go derelict because of the unanticipated factor which consequence upon the initial computation of the developers. It is an incontestable fact that at place sod, undertaking failures are therefore adversely impacting our state ‘s economic wellness Tan A.L, ( 2004 ) 12. Countless unsold belongingss ensuing in a immense belongings overhang, which is one of the more urgent signifiers of undertaking failures. There is several of the ground for type of undertaking failures, but in failures causes by undertaking direction it is an simplism to generalise and classs failures in term of the clip, cost, and quality. Undertaking failures can be primary or secondary, serious or inconsequential. By utilizing the Selling-Off-the-Plan system the abandoned of the undertaking fundamentally affect in few party ( Tan.A.L, 2004 ) 49:

  • Developers
  • Government
  • Contractors
  • Fiscal establishments
  • Other factors


Developers are the chief party that contributed to the factor of the forsaking of lodging undertaking ( Esha.Z, 2006 ) 50. Problem normally arises and consequence abandoned lodging undertaking. Imperfection of the market system and unethical guess by lodging developers are amongst the factors lending to the market failure, ensuing in an overhang and glut of lodging ( Rameli.A, 2006 ) 71. Even some of the instances that, mismatch of lodging demand and supply resulted in abandoned lodging job ( Ho,1992 ; cited by Rameli.A, 2006 ) 39. Developers fail to gauge the gross revenues unit monetary value as hapless of feasibleness survey in term of land cost, finance cost, estimated the returns, gross development value, and gross building cost will stop up of the concept cost more than the develop cost. For illustration, that is non-availability of comfortss for the site and developers have to come out with ain cost to link the chief H2O pumping from outsource to theirs develop country and unanticipated the high infra construction cost during feasibleness survey phase. ( Dahlan, N.H. , 2008 ) 51

Additionally, developers forced to halt mid manner through the undertaking when confronting fiscal job as fails to procure the targeted demand to interrupt even due to high or unsuitable pricing of the merchandise and deficiency of feasibleness survey in taking the site for develop, the type of development, and precise in supply and demand. Developers are deficiency of a feasibleness survey to estimate its economic and proficient viability from the really onset. The perpetrator may come from hapless planning and researches as the developers that rush into a development without comprehensive market survey will most likely cause developers stuck in a undertaking due to hapless hard currency flow. For illustration taking a strategic location for develop is of import and act uponing the interested for the consumer to purchase the merchandise Tan.A.L. , ( 2005 ) 59. Besides that, developer ‘s deficient fund or Michigans to operation and go belly-up as the failing of the company in fiscal direction. ( Dahlan, N.H. , 2008 ) 52

Undertaking may establish failures do to the developers as it appointed the rawness undertaking direction adviser PMCs or undertaking directors PMs to pull off the undertaking. The reverberation of the jobs would be in pull offing a good hard currency flow of the undertaking and doing the undertaking cost overproduction, deficient quality control, hapless planning causes the manpower deficiency of supervising and coordination, quality of merchandise is low as ever hold. ( Tan. A.L, 2004 ) 53 The developers fails to invariably day of the month the first estimation undertaking cost by wrong arrested development and causes deficient fund to pay the contractors interim certificate claim. Furthermore, it will hold a instance of uncertainness prevails over payment and timing with deductions on the contractor ‘s hard currency flow ; design alterations that may adversely sabotage timely bringing of the undertaking ; and readings of the contract paperss which may take to differences and litigations. ( Tan. A.L, 2004 ) 55

For case, failing of the developers in direction of the undertaking organisation usually will be the failing in planning and control. It would do the undertaking will neglect to finish within the fixed period and undertaking may establish excessively many people involve and lead to overstaffing slows communicating and determination and increase the alterations of forces therefore interrupting smooth advancement. ( Tan. A.L, 2004 ) 54 Conflict between landlord and lodging developers would ask for difference between household members for having the land in selling to developers and the developers may necessitate get down publicize house put up for sell but the land instance is still unsolved.

It will possible with the instance that, the developers used the advancement payment fiscal from buyer to other unrelated affair ( ain investing ) so the money on following month is stuck and unable usage for undertaking building payment. But, when they try to acquire the loan from fiscal institutes as their fiscal record of the developers is instability causes barely to acquire blessing in application of bank loans. Site probe and design phase both autumn under the criterion that is important for the success of the undertaking. For illustration, the developers fails in analyzing the regulation and ordinance of the secret plan ration demand on that country for develop with non fulfillment design type of lodging will do him unable to acquire the approver from authorization ( Tan.A.L, 2004 ) 56. The irresponsible attitude of the developers as give precedence to the net income by presenting stamps to unqualified contractors.

Government organic structure

Statutory proviso provided by Ministry of Housing and Local Government ( MHLG ) , Local Authority, be aftering authorization and proficient bureaus had failed to purely supervise the term in legal proviso and demands in the Selling-Off-The-Plan system. For illustration, the Housing Development ( Licensing and Control ) Act 1966 ( Act118 ) and its ordinances, are blatantly disregarded by developers without any penalty being meted out to and legal action taken by the governments against them and RM200,000 as a sedimentation for the lodging development history are see minor and small for recovery if they was an derelict lodging undertaking. The low-cost policy which requires developers to develop certain per centum of low cost lodging with maximal merchandising monetary value sum able to RM 42,000 will be tied and this is burthening the developers. Additionally, inefficient development control procedure by the Local Planning Authority in ‘filtering ‘ and measuring the new lodging development application may besides lend to flood of lodging and later exacerbated the jobs in lodging market ( Rameli.A, 2006 ) 40.

Harmonizing to Sufian.A and Rahman.R ( 2008 ) 58 the Street, Drainage and Building Act 1976 ( SDBA ) and the UBBL do non enforce any specific responsibility on the local authorization to inspect the building work done by a contractors. In the Selling-Off-The-Plan System, the responsibility for review prevarications on the qualified individual who submitted the program. Therefore, the local authorization will merely carry on an review if there is a study on the failure of the edifice ( Section 70B, SDBA ) . This will do the unethical designers to O.K. the developers on the monthly claims which really is claims overestimated, leting the developers to pull more money from buyers and the bank. There are besides failings projected in the Local Authorities be aftering blessing system where lodging applications were being permitted without taking into due consideration the existent demand and the procedure for blessing the application ever detain plus the demand for a long period as the applier have to mention assorted section. This will do the developers to “ confront the music ” on the addition for the edifice cost as the period of waiting the stuff cost lengthen. ( Peter Chin, 2003 ; citedby Rameli.A, 2006 ) 41.


Contractors failures will be one of the issue contributed to the abandoned of lodging undertaking ( Tan.A.L, 2004 ) 57. The causes of the contractors to abandoned lodging undertaking can be explained as follows:

  • Contractors deficiency of experiences in Selling-Off-The-Plan system and do n’t hold the house thought to beginning for financess others so the advancement payment from the developers and will ask for project forsaking due to insufficient financess or undertaking funding.

Fiscal Institutions

This is apprehensible, as in the economic recession, Bankss would be loath to allow lodging loans to the developers and house purchaser as they are many bankruptcy in the state. This may do the party troubles in acquiring bank loan as the bank may put the high qualify and demand for grant lodging loan to protect its involvement as the show concern twosomes with high pitching ratio of borrowing and less generating net income by Bankss, trades and concern entitle. The little and average size developers may confront troubles to obtain the bridging financess from bank and eventually will do them weaker fiscal capableness. Furthermore, this phenomena keeps on repeating particularly during economic down bend and the rising prices rate are high where it may do the fiscal establishments non to blessing any loans or even loans are approved. The charges of involvement rate will surely traveling up drastically and high to the developers and when the involvement rate additions it will do the direction of company operation cost to increase and this will cut down the developer ‘s net income. Meanwhile, the job may lift up as the bank merely O.K. the claims and without behavior further due diligence probes and confirmations of truth of the certifications issued by the undertaking designers and presented by the developers in the Sell-Off-The-Plan system. ( Cheong, Eranest, 2009 ) 29

Other Factors

  • Every measure prescribed under the Housing Development ( Control and Licensing ) Act ( the Act ) is being taken by the Ministry of Housing and Local Government ( MHLG ) to minimise the figure of abandoned lodging undertakings in the state. However, there are unanticipated of the environmental factor beyond the control of the ministry, such as the Asiatic fiscal crisis of 1997-1998, that have hurt many little lodging developers and caused undertaking forsaking. ( Parameswaran.G, 2006 ) 24 Subsequently, constructing cost non stable with the insufficient of constructing stuff supply and higher costs of stuffs monetary values, particularly that of steel bars and cement and this will caused the contractors unable to finance the costs and holds in or deferment even worst edifice undertaking get abandoned. Against a background of an economic roar, the traditional ball amount contracts and coupled with an epoch of high rising prices can bring forth considerable uncertainness over the monetary values and supply of input resources. It will act upon for the Selling-Off-The-Plan system as this system take longer authorization blessing period.

Furthermore, the inquiry facing by the state particularly in the building sector which is deficit of skilled and unskilled workers. Insufficient supply of work force will put the building work deficiency of machinery to transport out the heavy concept work and do the undertaking hapless public presentation or fruitlessly. On top of that, the job may be found when that is a proficient troubles for illustration, the cleft and failures of development foundation and doing the work have to be demolish and re-construct when the house is about to finish.

Chapter 4.0: Factors lead to a successful lodging development undertaking

4.1 Introduction

Harmonizing to Balchin P.N, ( 1985 ) 37 development are complex and dearly-won as it may hold cardinal alterations occur in the market to increase the hazard before the strategy is successfully completed. Tan A.L, ( 2004 ) 36 pointed out that selling and PR accomplishments are besides important for success. Meanwhile, he besides stressed that authorization is the custodian and precautions of public safety to avoid undertaking failures. The function of the authorization is to guarantee that merely qualified professionally advisers are allow to subject the relevant edifice programs to derive the different type of blessings such as development order, technology substructures, layout and edifice program blessings. The authorization like CIDB/JKR must work to transport out their function in look intoing the site worker to guarantee they are accredited, the occupation specifications to follow up the technology codification. In add-on, they must be tight in control development and building procedure to guarantee the regulations and ordinance are adhered to. Harmonizing to Chan P.C, ( 2004 ) 14 success of building undertaking besides greatly depend on the flexibleness of the builders. A right attitude for contractors will stress complex affairs with easiness and obeys the applied scientists ‘ instructions. Nevertheless, whereas a greedy and hard contractors ‘ will ever seek to derive the maximal net income by minimising work from the loopholes in contract papers and other working status. The undermentioned issue discussed would be the different parties ‘ point of position in order to forestall the wantonness of lodging undertaking. The parties involved would be the Developers, Government, Contractors, and fiscal establishments and the possible purchasers that are prospectively victimized.

4.2 Prevention of Abandoned Housing Project

4.2.1 Adopting Build-Then- Sell ( BTS ) construct

BTS may be viewed as an option to undertake the jobs faced by houses purchasers who suffer from irresponsible developers. This construct is handful of successes narrative and proved work good which execution in developed states where their lodging industry is mature and there are fewer jobs.

The BTS is a construct where the developers can merely sell the to the full constructed houses together with the issue of Certificate of Completion & A ; Compliance ( CCC ) . There is no advancement payment made by house purchasers to the developers and the developers have to bear all costs by utilizing their ain capital or loan from fiscal establishments or both. Developers can sell his merchandise before or during building but he can merely roll up a little sedimentation from the house purchaser. The developers are non allowed to roll up progress payment based on enfranchisements from designer, as under the STB construct. Furthermore, a possible house-buyer can see and inspect the unit physically before make up one’s minding whether to purchase or non. In this circumstance, the developers will hold to make a better occupation, i.e. good design, good quality of craft, faster completion and high quality of coatings. ( Esha.Z, 2006 ) 48

Under build than sell ( BTS ) construct, the possibility of the incidence of abandoned undertaking will be reduced and even the jobs non dispose wholly the house purchasers or terminal moneymans besides will non be caught. As for the house purchaser, they can profit through the quality of the units with the developers can acquire shortens the keeping cost and can salvage on the development cost. Harmonizing Isa, Z ( 2008 ) 60 the house purchaser are deriving the advantages with given a 120 yearss grace to pay for the house plus the building period to procure his terminal funding. Therefore, when in the event abandoned of the undertaking the purchaser does non transport any fiscal load as purchaser has the right to revoke the contract and have the sedimentation return together with any involvement that may hold accrued. Furthermore, with the ready unit the house purchaser can see and inspect the unit physically and able to do the determination besides overriding consideration of the unit pricing.

Unfortunately, there is a possibility that private developers in lower supply of production of lodging unit as they need to confront the hazard and load on involvement with which they could non acquire the advancement payments from the house purchasers and they merely can depend on the developer ‘s on the job capital, recognition from providers, increasing the among for bridging funding from bank or fiscal establishments which will causes the increasing of involvement to pay for the loan. As a consequence, the house monetary value may lift due to higher cost of making concern or building costs caused by higher loan involvement will affected the house purchasers and shrivel the building industry itself in footings of shriveled building activities and employment of this peculiar sector with the proviso for aiming lodging unit under Malaysia Plan.

However, the authorities has a bold measure to better by the lodging deliver system by spread outing the function of the current One Stop Centre ( OSC ) ( KPKT, 2007 ) . It will consequences in the developers able to derive the development blessings within four months, shorten the building clip start and complete lend the lower opportunities go on of unanticipated circumstance ( prevent any rising pricess cost ) . Thus it is non merely profiting to the developers with lead to take down keeping cost, interpreting into better efficiency of capital investing but besides to the house purchaser as will the house will be handed over the completion unit together with the Certificate of Completion & A ; Compliance, Certificate Fitness, and Vacant Possession issue by the several local authorization. The authorities has besides provides inducement with freedom of the RM 200,000 sedimentation fee for lodging development licence, bask the exclusion from holding any Housing Development Account, given full release from 30 percent demand of low-priced lodging building quota. Additionally, under the system the developers are allowed to roll up sum ( 10 % to 15 % ) of selling monetary value from buyers as committedness to the development undertaking which will besides cut down the developers hazards by obtaining a little sum of finance from the buyers and easy for them to acquire loan from the fiscal establishments.

Besides that, the authorities could besides help the developers in giving the revenue enhancement inducement with supplying fiscal aid to prolong developers from National Bank of Malaysia ( BNM ) and giving the inducement to the fiscal establishments that support the execution of such construct. In order to fund the fiscal for BTS-practiced it is recommendations that the developers could organize a joint venture company and signifier pool or syndication amongst little graduated table developers so can develop a strong fiscal capital. Developers besides could originate the construct on a small/ medium graduated table undertaking.

It may be possible that the developers be stuck with unsold unit and paying for the keeping costs while expecting the purchasers. However, the developers can advance the sale unit with supplying longer defect liability period to ten ( 10 ) twelvemonth to forestall this job. Subsequently, under the BTS system it may assist to bailing out the bad developers from the industry developers which can besides to guarantee top quality craft in order to absorb the involvement of the purchasers thereby extinguishing the concern about being stuck with unsold, completed units. In summing up for the lodging development undertaking, the banker and developers are the net income shapers so they should be the hazard takers but non to the purchasers as the Bankss will come after purchaser regardless of whether they have received their houses or non. In other words house purchaser should be protected from any development hazards. ( HOME FINDER, 2006 ) 61

4.2.2 Developers ‘ Resolutions to Reduce Project Failures in Selling-Off-Plan System

A figure of variable factors act uponing the abandoned lodging undertaking and suggestions betterment from the developers view were identified as following ( Tan.A.L. , 2005 ) 59:

  • Obtain detailed and “ Professional ” feasibleness survey or market study such as preliminary site visit and probes, conventional layout program, market analysis, demand scenarios, possible demand type of occupant houses, population catchment, income degree, economic activities of the country, analyze current market tendencies and likely development in the belongings market, pricing scheme and timing of the gross revenues lunching, socio-economic survey and SWOTS analysis. The aim is to guarantee supply lucifers demand, right type of lodging unit is built, in the right location, at the right clip and at the right monetary value.
  • It is of import to name the right, competent and capable undertaking direction adviser PMCs or undertaking directors PMs who are good trained and with first-class attitudes, experience professionalism strategic, and effectual and efficient undertaking success in Selling-Off-The-Plan system.
  • Appoint the qualified and experience undertaking squad member with verify their attitudes, committedness and professionalism with the good path record of holding completed relevant undertakings successfully.
  • Understanding and to the full abide all guidelines spelt out in the lodging development act, regulations, by-laws, and ordinances regulating edifice, township and environment, and the function of governments in development procedure.
  • Developers should utilize the advantages able to roll up progress payment in Sell-Off-The-Plan system with adopt proper hard currency flow direction to avoid liquidness jobs and able to conserve the hard currency flow to maintain afloat during the unprecedented economic crunch and to sit out any cyclical “ hiccoughs ” as the postponement or lag or undertaking means significant keeping cost ( Ng. Angie, 2009 ) 9.

Harmonizing Ng. Angie ( 2009 ) 11, to increase merchandise gross revenues for developers, non merely they must present the right merchandise, right location and pricing in order to establish despite any uncertainness, developers should besides make some serious “ psyche seeking ” to happen out what precisely belongings purchasers are looking for ( follow the Build so sell system ) and have to function purchasers better with provide harmonizing alterations life style of people demanding for illustration easier handiness and convenience of metropolis life, plans to guarantee occupants experience safe, unafraid and peace of head, and convenience of the services provided by the gated and restrained construct.

Additionally, house purchasers may experience secured for the undertaking that the developers can proactive by demoing their committedness to their undertakings with seting up the necessary substructure in front of a undertaking ‘s launch to consequence of slow gross revenues on their bottom line and endurance. To extenuate the hazard, developers can besides promote purchasers to subscribe on the dotted line by supplying artless program with working of their panel of bankers to supply easy funding strategies to buyers. ( Ng. Angie, 2009 ) 18

Buyers ‘ demands are ever germinating and developers who take the problem to remain in touch with them will profit enormously. Therefore it is of import to prosecute the clients ‘ by cognizing what they want so that the undertakings can be planned consequently. This enables the developers to remain path ( in line with ) the current wanting development. In add-on, the developers can utilize cyberspace to interact straight with purchasers by opening up the communicating channel through a good managed and user friendly website. The bipartisan communicating flow and interaction will advance a more good informed and knowing society. This could assist the developers to acquire priceless first manus information from the house purchasers on how to plan, or redesign, their undertakings. More significantly, developers who values house purchasers ‘ positions and input will be able to hold the right merchandises in topographic point, whether it is during the good or bad times. ( Ng. Angie, 2009 ) 28

4.2.3 Government ‘s Resolutions to Reduce Project Failures for Selling-Off-Plan System

The execution of the BTS-practice is one of the effectual methods to work out the derelict lodging undertaking job but since it is non mandatory for the developers to public-service corporations this pattern, bar steps can be taken into history to better protection for the house purchasers ( Sufian.A and Rahman.R 2008 ) 62: First and first, MHLG should hold the licensing system as pattern by Construction Industry Development Board ( CIDB ) to classs developers base on their expertness, ability, resources or public presentation. Furthermore, the different type demand for application of developers ‘ licence should be based on their public presentation record and concentrating on a developer ‘s fiscal capacity. For illustration, required higher sedimentation and stomp responsibility for developers who ever ailments from purchasers or even curtail that peculiar lodging developers from obtaining a licence for house development for a certain period.

Following, authorities should rush up the procedure as close link the section which is responsible to treat and O.K. the application for licences to go more efficiency. For illustration, within 3 month the developers are able to cognize whether their applications are acceptable. Furthermore, Housing and Local Government Ministry, Local Authority, and fiscal establishments should more consistent and effectual on supervising interim claim and interim study with the site visit look intoing where submitted by undertaking adviser. Meanwhile, it is necessary impose rigorous regulation to stop up the spread in the Act for sweetening of the house purchasers protection for Selling-Off-The-Plan. For illustration ; higher punishment to those developers non opening and keeping the HDA or develop without licence, counter-checking all claims made on the HDA, guaranting developers submit their one-year audited fiscal studies, fined and jailed the developers and professional or legal guardians who flout the Act, blacklisting developers and printing the repute of company name to the citizen so house purchaser will be more discerning and verify the dependability of a developers before subscribing on purchase understandings. ( NG.Angie.2009 ) 63

Additionally, the Government should cut down the revenue enhancement on edifice stuff and take the 10 % import revenue enhancement to do edifice stuff affordable in assisting the developers and contractors enable to counter the lifting monetary value of stuffs. Furthermore, in order to guarantee equal supply of constructing stuff, the authorities should enforce an export revenue enhancement and let the import of the edifice stuff. ( Lee.R,2009 ) 65. The authorities is supposed to beef up and integrate the overall lodging planning and blessing procedure, peculiarly in the readying of development programs at the phase of development controlled by the Local Planning Authority. Not merely element such as run intoing the population lodging demands but besides concerns about the market demand mechanisms, such as effectual lodging demand, family lodging pick, current and future market demand, local market conditions and guarantee efficient public conveyance so that these low-cost strategies will be taken up and non left vacant like some of the undertakings that have hapless handiness. It is of import for the authorities to do certain the developers crucially uphold their duties towards house purchasers by guaranting proper feasibleness surveies are conducted to determine a undertaking ‘s viability before it was launched and punctually complete their undertaking on clip ( Rameli.A, 2006 ) 67.

Furthermore, the low-priced lodging policy shows that developers have to put a part of the land for low-priced lodging for those undertakings more than 10 estates will burthen the developers and sometime will do them concern loss. The authorities should see the alteration of demand or reappraisal with raise the cost of maximal RM42,000 in current low-priced lodging policy and the authorities can set about the populace or low-priced lodging so that the developers are “ free ” from duty and able to concentrate on constructing more market driven merchandises and with no load the developers. ( Ng. Angie, 2009 ) 22

4.2.4 Financial Institution ‘s Resolutions to Reduce Project Failures in Selling-Off-Plan System

The Bankss can forestall undertakings for being abandoned as it shall non continue to pay the certifications claims issue from designer. Furthermore, Bankss can name independent designers, measure surveyor, and any belongings advisers to transport out independent site reviews to verify the truth and truth of the certifications. Even the Bankss have located excess cost for hire those professional to treat the work but it would hold saves the Bankss in the load of holding to shoulder 1000000s, or even billion, of ringgit in non-performing loan.

4.2.5 Contractor ‘s Resolutions to Reduce Project Failures in Selling-Off-Plan System

It is utile to maintain in head that works points are normally cost heavy and hence adequate works direction on site will accrue positive cost, benefits to the contractors. A utile starting point for the direction of works begins with a programming of the works needed for the undertaking. The day-to-day works demands are compiled by tabling the necessary pieces of works needed for each undertaking. If the labor supply has fallen short for one ground or another and non in a place to run into the demands expected, so a instead complex state of affairs has arisen which requires the focal point of site direction. It is possible to widen the working hours on the critical activities by establishing overtime work and a long term solution may include enlarging the external beginnings of labour supply from oversea. Besides that, contractors are advised to be able to implement Industrialised Building System ( IBS ) as it will minimise the job of insufficient skilled workers and manpower for the building activity. Meanwhile, it would besides assist in helping the contractors bring forthing quality home. The site direction shall do the best usage of the work force and at the same clip seek to cut down the clip overrun as it is practically possible. Sufian.A and Rahman.R ( 2008 ) 66

Contractors are significantly to supervise and program with sufficient, timely supply of the building stuffs in the development. It is prudent to take into consideration the lead times ( clip needed to bring forth store drawings, entry and resubmissions for blessing, industry and bringing to site. ) necessary particularly for cardinal stuffs or constituents which are usage made for the undertaking. As the sum of the attending expended on stuffs supervising and in peculiar bringing will bear fruits in so far as the continuity of the site work flow is concerned. Meanwhile, the contractors should maintain on updated and analyze the tendency of pricing for stuffs, so the contractors can foreseeable and tender in an expected higher monetary value for the undertaking. Contractually, the contractors should bespeak following proper hard currency flow direction, proper budgeting, and effectivity of cost control system and velocity of information flow are the key for the contractors to concentrating to avoid the failures of the undertaking. Tan.A.L. ( 2005 ) 64

4.2.6 Purchase ‘s Prevent be a Victim in Selling-Off-The-Plan System

House purchasers have function to play in guaranting that they did non purchase a house which is debatable or has the possible to be abandoned. There is overpluss of functions that needed to be instilled among house purchasers before even make up one’s minding to purchase a house. Among them are during supervising phases, during subscribing Gross saless and Purchase Agreement ( SPA ) phases, after SPA sign language and during let go ofing ownership bringing period ( key-turning point ) . Supervision phases

Before doing determination in purchasing house, house proprietor need to do through approximately supervising to guarantee that the fiscal situational of financer ( developers ) place by sing the developer ‘s office to do certain that the developers has important licence, publicizing license and selling that is to be endorsed by Ministry of Housing. Next, the place of the fiscal state of affairs ought to be determined, manager ‘s position and current balance sheet of the mentioned company. Additionally the house purchaser personally has to travel to the site location where the alleged house is to be built. The specification like the type of house, comfortss provided would accommodate the purchaser ‘s purpose bargain. On top of that, the purchasers has to mind of overdone spread propaganda about the values of the house strategy that would lift drastically in the fastest clip or future promising development that has been allegedly pledged as authorities policies kept on altering and the existent estate worth is depended on political and economical advancement. All those promises have to integrate in black and white as in SPA.

Potential purchasers besides need to obtain upfront and the latest information from the developers sing the position of the land and counter cheque against oneself on the land office naming sing the ownership of the land, batch no, type of land usage and precedence countenance that holds, freehold or leasehold and even mortgaging ( do certain the continuance it is being mortgaged ) at the Land Office or State Registrar with a small spot of payment made. Through all these the fiscal state of affairs of the developers will be farther noticed by the house purchaser.

House purchasers besides must make multiple computations with scrutinize of ain fiscal establishing to obtain certain loan. Interest rate applied besides has to be taken consideration and affairs related to refund. House purchaser besides must non hotfoot to obtain the loan strategy and choose the best possible loan with good comprehension on the footings and conditions of each bundle. Furthermore, house purchasers besides must see taking out the protection insurance to avoid accident that will do decease or even paralyzing organic structure for the full life.

Potential purchasers besides warned over temptation of the show units which presents are attractive and tempting based on the advertizement put up ( attractively illustrated design ) . Alternatively they should acquire relevant and accurate information on the specification, plans allocated etc. House purchasers besides are advised non to be tricked on where the developers ‘ allegation that the house built would be selling fast. The developers do this is to tempt purchasers into purchasing their build lodging as competition is high among other developers. Buang.S, ( 1993 ) 21 Prior to Signing Gross saless Purchase Agreement ( SPA )

Groking the SPA is exceptionally of import therefore the house purchasers could seek aid from the developers or even the panel of attorney to specify the significance. In order to continue the purchasers ‘ right, the purchasers can engage ain attorneies as developers can non coerce the possible purchasers to utilize the panel of attorneies of their ain ( developers ‘ ) . Some of the of import notice that needed attending before subscribing would be the batch ordinal number, land country, monetary value, location batch and house specification. Furthermore the completion period besides needed to be determined ( 24 months for land with edifice and 36 months for strata rubric land ) . The purchasers besides must cognize their right in instance the developers defaulted or frailty versa where the developers claimed on the involvement from purchaser if purchaser fails to follow with the contract like phases payment failed to be fulfilled within 21 yearss. The purchaser besides has the burden to guarantee that the receipt payment day of the month has to be tallied with day of the month of subscribing SPA. Buang.S, ( 1993 ) 23 Upon Signing Gross saless Purchase Agreement ( SPA )

After subscribing the SPA and sedimentation paid, the purchasers automatically has the straight-out ownership on the house bought. A private caution has to be logged against other people that claim over the ownership of the house. It can be done in the Land Office or any other institutional. House purchasers that use hard currency and KWSP would be sagely advised to log private caution even though auctioning of the house due to the default of house purchasers. The possible house purchasers besides are advised to inform the Supervision and Enforcement Department of the Ministry of Housing so that farther action can be addressed.

Chapter 5.0: Research Methodology

5.1 Introduction

In this chapter describes the method and processs implemented to accomplishing the aims of this research. Questionnaire was conducted for the method of informations aggregation.

5.2 Methods of Data Collection

Basically, information needed for research survey may be beginning from two country i.e. Primary informations and Secondary informations. Data aggregations involve in combine all required information to organize the indispensable in accomplishing the aims of the survey. The primary informations for the survey will be obtained through the literature reappraisal, which from mention book, diary, and articles where from the library and the intelligence reported in cyberspace. Besides that, primary informations will help for the preparation